In his final State of the Union speech President Barack Obama proposed a new policy which took some observers by surprise – wage insurance. The proposals would help protect experienced workers if they lose their job and then find new work at a lower wage. If the new job earns less than $50,000 then for two years the government would help make up half the shortfall for a maximum of $10,000. The plans would be funded by a tax on workers of around $25 a year.

Mr Obama has characterised this measure as something to help working people adjust to the changes technology is inflicting on the world of work. So for example bank workers replaced by kiosk machines may well need to some re-training to establish a new line of work. Rather than holding out for jobs which matched their previous pay, the wage insurance would help encourage them into jobs with lower initial pay but with the valuable on-the-job learning they needed.

Such policies have to be government led to work, private unemployment and wage protection insurance tends to be costly as it’s only those feeling most at risk that are likely to sign up. Without the contributions from those in secure jobs the insurance funds are inadequate, but those in a safer role are unlikely to want to spend their salaries on such insurance if they don’t have to.

More fundamentally however this entire policy assumes that workers are all in steady jobs with a regular monthly paycheck. This is less and less the reality of the working world. An ever-growing number of people are choosing to work for themselves. If you run your own micro-business or work freelance then your focus is on winning client work, not salary scales. Given that most people work for themselves are happier and experience less stress, it’s unlikely an insurance plan for returning to salaried work is going to be attractive.

Given the estimated costs for the US proposal are in the billions, is this the best way to offer support in the changing world of work? And is a measure which would be targeted just at experienced workers losing their salaried jobs be effective given that youth unemployment is a particular concern in many countries?

That’s not to say some insurance isn’t worthy of further investigation. For example the Freelancer’s Union in the US have effectively collectivised the self-employed to provide much needed affordable healthcare insurance packages. Similar approaches are possible for illness cover and other risks micro-business face.

There’s no doubt that losing your job and finding a new one is tough at the best of times. But in my view spending billions to help just a small fraction of those in work – experienced workers finding a lower earning new job – is not worthwhile. Far better to secure the overall safety net for people as we move to an ever more changeable work environment. Which is why proposals like a Universal Basic Income seem a more appropriate solution for the future.

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